Friday, February 12, 2010
Money quote from the governor's speech:
"Today, we come to terms with the fact that we cannot spend money on everything we want,'' Christie told a special joint session of the legislature. "The days of Alice in Wonderland budgeting in Trenton are over.''The heart of the matter:
One state retiree, 49 years old, paid, over the course of his entire career, a total of $124,000 towards his retirement pension and health benefits. What will we pay him? $3.3 million in pension payments over his life and nearly $500,000 for health care benefits -- a total of $3.8m on a $120,000 investment. Is that fair?While no doubt painful for New Jersey, it's nice to see one of our politicos acknowledge that pain is something that we have to experience in order to avoid outright calamity. There is likely more coming to a state near you. I predict the escalating war between tax payers and public employees unions will be a major issue for the next several years.
A retired teacher paid $62,000 towards her pension and nothing, yes nothing, for full family medical, dental and vision coverage over her entire career. What will we pay her? $1.4 million in pension benefits and another $215,000 in health care benefit premiums over her lifetime. Is it “fair” for all of us and our children to have to pay for this excess?
MORE (from TigerHawk): "
When I bought my house fourteen years ago the taxes were $9,000 per year. Now, 2010, the taxes will be $32,000. Having just completed a revaluation in Princeton Borough, I cannot wait to see how my new property taxes will reflect the Governors actions. The unionized employees of the Borough, the County and the School Board (all of who bite their pieces of my property taxes) will no doubt press to have those taxes raised. In the face of an ongoing housing price decline it won't just be me anymore ranting against the unions.
While the $120k put in and $3.3M out story seems crazy, it also seems to paint the retiree and union as some kind of financial predator (as opposed to receiving a $2M bonus for simply handling money between one bank and another). The fact is the state leaders agreed that for every X dollars their employees contributed to their pension plan, the state would contribute Y dollars (essentially pre-tax employee pay) in exchange for not paying higher salary. It’s a mess regardless of how the state got there, with bad decisions all around.
Historically, that was part of the trade off. You made less in the public sector than the private sector, in exchange for the benefits. It is unsustainable and needs dealing with, but Anon@2:22 is correct that it is wrong to paint the retirees as predators. My significant other is an elementary school teacher who has been teaching in an affluent big city suburb for 15 years. She's counting on the pension because her meager salary doesn't allow her much savings.
I wish the Governor luck in this endeavor. Here is a different state moving in the opposite direction; a recent article by John Stossel: http://stossel.blogs.foxbusiness.com/2010/02/11/forced-unionization/
I always thought that summers off and tenure were the reasons many teachers took the jobs. For other government workers, retirement after 25 years was an incentive. I'll bet most of the soldiers now in harms-way every day would love the benefits most law enforcement employees get.
Every state and municipal government is going under because of these "negotiated" deals which were made, not with their own money, but that of the taxpayers. Now the taxpayers are waking up and those politicians like Governor Christie who might take the necessary steps to correct the problem will be one-termers because of the enemies they will necessarily make.
It's definitely a difficult issue with no easy solution, but the current commitments in many states (and of course at the Federal level) are simply unsustainable. As a commenter on a similar thread at Calculated Risk stated, the public employee unions and the government have been negotiating from the same side of the table. That needs to change.
Christie seems to understand the situation. And is making the right sounds.
There is no reason to think he will get very far.
I am disappointed to see him using the "fair" and "unfair" words. Those words do not change minds or enlighten them.
A better approach might be to say
"Face the facts. We don't have the money and we can't get more."
What cannot continue will end. Only politicians deny that.
It is better to cut, and cut hard, to keep the bare essentials operating.
Or they can stall until the train wreck.
Nah, nah, nah! I can't hear you!
Several other states must do the same. But today, after two or three years of deteriorating finances and economic crisis most have changed nothing.
Kansas City, Kansas local government employee, college graduate, sixty-five thousand a year salary. Retires at age fifty-six, will receive more in retirement payments than salary, plus insurance and what was stashed in the government saving plan from Kansas.
Another way of looking at the retirement benefits of public employees is by pricing an annuity that duplicates these benefits. If those of us in the private sector wished to buy an annuity at retirement age that provided us with the same benefits we’d have to pay millions of dollars.
There’s yet another way of looking at it. Fidelity says you should have a portfolio 25 times the yearly income you desire. If I want $50k of income I need to retire with $1.25 million in securities at 65 year of age. That should be greater if you retire at a younger age.
We taxpayers of New Jersey are expected to make public employees millionaires by the time they retire. To the average private sector worker who is lucky to retire with $100k of investments, this is outrageous.